Bill Text: OR SB712 | 2013 | Regular Session | Introduced

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Bill Title: Relating to state finance; declaring an emergency.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Failed) 2013-07-08 - In committee upon adjournment. [SB712 Detail]

Download: Oregon-2013-SB712-Introduced.html

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     77th OREGON LEGISLATIVE ASSEMBLY--2013 Regular Session

NOTE:  Matter within  { +  braces and plus signs + } in an
amended section is new. Matter within  { -  braces and minus
signs - } is existing law to be omitted. New sections are within
 { +  braces and plus signs + } .

LC 1752

                         Senate Bill 712

Sponsored by Senator BOQUIST

                             SUMMARY

The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.

  Establishes Oregon In-State Loan Fund. Specifies purposes and
contents of fund. Directs Oregon Growth Board to manage fund.
Allows board to purchase, hold or sell certain loans or
participation interests in loans.
  Establishes January 1, 2014, operative date.
  Declares emergency, effective on passage.

                        A BILL FOR AN ACT
Relating to state finance; creating new provisions; amending ORS
  293.701, 293.728 and 294.035; and declaring an emergency.
Be It Enacted by the People of the State of Oregon:
  SECTION 1.  { + Sections 2 to 5 of this 2013 Act are added to
and made a part of ORS 293.701 to 293.820. + }
  SECTION 2.  { + The Legislative Assembly finds that:
  (1) The availability of capital for Oregon small businesses
that are engaged in economic development is critical to continued
job growth and development of the economy of Oregon.
  (2) Currently existing state-managed funds constitute a major
financial resource of the State of Oregon. Prudent investment,
management and coordination of these funds may, together with
access to capital provided in partnership with financial
institutions, enhance the availability of capital for Oregon
small businesses and farms and contribute to sustainable job
growth.
  (3) Establishment of an Oregon In-State Loan Fund will:
  (a) Help keep Oregon moneys invested in Oregon;
  (b) Strengthen the economies of local communities by keeping
more loans, and the interest earned on those loans, in the local
communities and in Oregon; and
  (c) Support local financial institutions by recognizing the
importance of those institutions in understanding the needs of
local communities and in providing access to capital funding for
small businesses and farms. + }
  SECTION 3.  { + As used in sections 2 to 5 of this 2013 Act,
unless the context requires otherwise:
  (1) 'Business' means a corporation, partnership,
proprietorship, firm, enterprise, joint venture, franchise,
association, organization, self-employed individual or other
business entity operating or doing business in Oregon.
  (2) 'Community bank' means:

  (a) An insured institution that is organized under the
provisions of ORS chapter 707 and has its principal place of
business in this state;
  (b) An insured institution that maintains a head office or
branch in this state and has assets of less than $10 billion;
  (c) A credit union as defined in ORS 723.006 that has its
principal place of business in this state;
  (d) An interstate credit union as defined in ORS 723.001 that
is chartered under ORS chapter 723 and has its principal place of
business in this state;
  (e) An interstate credit union as defined in ORS 723.001 that
is chartered under the authority of the laws of another state,
has its principal place of business in this state and has assets
of less than $10 billion; or
  (f) A federal credit union that has its principal place of
business in this state and has assets of less than $10 billion.
  (3) 'Economic development' means development that relates to
and supports the economic development policy and strategy for
this state outlined in ORS 285A.020, and that promotes, expands
or prevents the decline of a business located or to be located in
Oregon.
  (4) 'Financial institution' means a community bank and any
other institution defined by rule of the Oregon Growth Board as a
financial institution for purposes of section 5 of this 2013 Act.
  (5) 'State agency' means an officer, board, commission,
department, division, institution, branch or agency in the
executive or administrative branch of state government or a
public institution of higher education.
  (6) 'State fund' means a fund established under the control and
administration of a state agency that has entered into a contract
with the Oregon Growth Board for investment and management of the
fund. + }
  SECTION 4.  { + (1) The Oregon In-State Loan Fund is
established in the State Treasury as a commingled investment
vehicle for investment funds and moneys or investment vehicles
described in subsection (2) of this section. The Oregon Growth
Board shall administer the fund. Interest earned by the Oregon
In-State Loan Fund shall be credited to the participating
investor funds or accounts in the fund in proportion to the
amount invested.
  (2) Unless a federal law, court order, settlement or similar
agreement or business practice requires otherwise, the following
moneys may be deposited in the Oregon In-State Loan Fund:
  (a) Moneys received by the State Treasurer that may not be
discretely invested as provided in ORS 293.723;
  (b) Moneys received by the State Treasurer that may be
discretely invested as provided in ORS 293.723;
  (c) Moneys transferred from the Oregon Short Term Fund
established under ORS 293.728;
  (d) Moneys invested by a county, municipality, political
subdivision or school district under ORS 294.035; and
  (e) Moneys invested by private individuals and foundations.
  (3) Pursuant to ORS 293.723, moneys in the Oregon In-State Loan
Fund may be discretely invested.
  (4) Moneys in the fund may be transferred as provided in ORS
293.205 to 293.225. The Oregon Growth Board is the board in
charge of the fund for purposes of ORS 293.220 and shall
determine the interest rate to be charged until the moneys are
retransferred to the fund. The interest rate may not be less than
the rate specified in ORS 293.220. + }
  SECTION 5.  { + (1) The Oregon Growth Board shall formulate and
implement investment and management policies and practices
subject to the standard set forth in ORS 293.726 for the
investment, reinvestment and management of moneys in the Oregon
In-State Loan Fund. In exercising its authority under this
subsection, the board may approve and direct specific investments
and strategies for the investment of moneys in the fund and may
make investments directly, without the use of a management
company, in any form or manner that would be lawful for a private
corporation having similar intent.
  (2) The board may enter into a contract with a state agency,
county, municipality, political subdivision or school district
for the investment and management of moneys over which the
agency, county, municipality, political subdivision or school
district has supervision and control and may enter into any other
contract the board deems necessary or appropriate to carry out
the board's duties, functions and powers under this section.
  (3) The board may:
  (a) Purchase, guarantee, hold or sell loans or participation
interests in loans originated by financial institutions doing
business in this state to:
  (A) Qualified businesses engaged in economic development that
are doing business in this state;
  (B) Public economic development agencies in this state; and
  (C) Individuals who are residents of this state.
  (b) Engage a Federal Home Loan Bank, or a Federal Reserve Bank
or another financial institution to maintain the liquidity of
moneys deposited in the fund from the Oregon Short Term Fund or
under ORS 294.035.
  (c) Perform all acts and do all things necessary, convenient,
advisable or desirable to carry out the powers expressly granted
or necessarily implied in this section through its chairperson,
officers, agents and representatives or by contracts with any
person, state agency, county, municipality, political
subdivision, school district or financial institution.
  (4) The board shall purchase, guarantee, hold or sell loans and
invest and manage moneys deposited in the fund in conformity with
policies and practices formulated by the board and the investment
standard stated in ORS 293.726 (1).
  (5) The board shall invest in loans or participation interests
in loans according to the following order of priority:
  (a) Commercial and industrial;
  (b) Commercial real estate;
  (c) Agriculture;
  (d) Affordable housing;
  (e) Government guaranteed residential loans;
  (f) Government insured portions of United States Small Business
Administration loans;
  (g) Student loans;
  (h) Bank stock loans to financial institutions; and
  (i) Letters of credit to financial institutions.
  (6) The board may enter into contracts with a fund manager or
one or more management companies for the provision of investment
advice, to manage the loan portfolio and set appropriate and
balanced loan portfolio targets for the fund and for other
services that the board deems reasonable and necessary to fulfill
the duties of the board under this section. A manager or
management company selected under this subsection shall manage
moneys in the fund subject to the investment policies and
practices established by the board with the care, skill and
diligence that a prudent investor acting in a similar capacity
and familiar with such investments would use in managing and
investing a similar account. Contracts entered into under this
subsection are not subject to the State Personnel Relations Law,
ORS 279.835 to 279.855 or ORS chapter 279A or 279B.
  (7) The board shall:
  (a) Set a reasonable and prudent leverage ratio of investment
funds to be used as equity or loan loss reserves from which to
leverage moneys in the fund;
  (b) Establish a maximum participation ratio of loans depending
on the asset category and risk profile of the loan; and

  (c) Give preference when selling loans and participation
interests in loans to financial institutions to loans in the
following order of preference:
  (A) Loans of less than $250,000,000.
  (B) Loans of $250,000,000 to $499,999,999.
  (C) Loans of $500,000,000 to $999,999,999.
  (D) Loans of $1 billion to $4,999,999,999.
  (E) Loans of $5 billion or more.
  (8) The board may assess and charge fees for services provided
in the management and investment of state funds that may be
credited against moneys earned from investment and reinvestment
of the state funds.
  (9) The board shall adopt rules that specify:
  (a) The board's powers, permissible investments and activities
and services that the board may provide.
  (b) Limits for loans and other obligations the board makes,
authorizes or undertakes.
  (c) Other requirements that the board considers necessary for
the exercise of the board's powers and functions under this
section. + }
  SECTION 6. ORS 294.035 is amended to read:
  294.035. (1) Subject to ORS 294.040 and 294.135 to 294.155, the
custodial officer may invest any sinking fund, bond fund or
surplus funds in the custody of the custodial officer in the bank
accounts, classes of securities at current market prices,
insurance contracts and other investments listed in this section,
but only after obtaining from the governing body of the county,
municipality, political subdivision or school district a written
order that has been entered in the minutes or journal of the
governing body.
  (2) This section does not:
  (a) Limit the authority of the custodial officer to invest
surplus funds in other investments when the investment is
specifically authorized by another statute.
  (b) Apply to a sinking fund or a bond fund established in
connection with conduit revenue bonds issued by a county,
municipality, political subdivision or school district for
private business entities or nonprofit corporations.
  (3) Investments authorized by this section are:
  (a) Lawfully issued general obligations of the United States,
the agencies and instrumentalities of the United States or
enterprises sponsored by the United States Government and
obligations whose payment is guaranteed by the United States, the
agencies and instrumentalities of the United States or
enterprises sponsored by the United States Government.
  (b) Lawfully issued debt obligations of the agencies and
instrumentalities of the State of Oregon and its political
subdivisions that have a long-term rating of A or an equivalent
rating or better or are rated on the settlement date in the
highest category for short-term municipal debt by a nationally
recognized statistical rating organization.
  (c) Lawfully issued debt obligations of the States of
California, Idaho and Washington and political subdivisions of
those states if the obligations have a long-term rating of AA or
an equivalent rating or better or are rated on the settlement
date in the highest category for short-term municipal debt by a
nationally recognized statistical rating organization.
  (d) Time deposit open accounts, certificates of deposit and
savings accounts in insured institutions as defined in ORS
706.008, in credit unions as defined in ORS 723.006 or in federal
credit unions, if the institution or credit union maintains a
head office or a branch in this state.
  (e) Share accounts and savings accounts in credit unions in the
name of, or for the benefit of, a member of the credit union
pursuant to a plan of deferred compensation.

  (f) Fixed or variable life insurance or annuity contracts as
defined by ORS 731.170 and guaranteed investment contracts issued
by life insurance companies authorized to do business in this
state.
  (g) Trusts in which deferred compensation funds from other
public employers are pooled, if:
  (A) The purpose is to establish a deferred compensation plan;
  (B) The trust is a public instrumentality of such public
employers and described in section (2)(b) of the Investment
Company Act of 1940, 15 U.S.C. 80a-2(b), as amended, in effect on
September 20, 1985, or the trust is a common trust fund described
in ORS 709.170;
  (C) Under the terms of the plan the net income from or gain or
loss due to fluctuation in value of the underlying assets of the
trust, or other change in such assets, is reflected in an equal
increase or decrease in the amount distributable to the employee
or the beneficiary thereof and, therefore, does not ultimately
result in a net increase or decrease in the worth of the public
employer or the state; and
  (D) The fidelity of the trustees and others with access to such
assets, other than a trust company, as defined in ORS 706.008, is
insured by a surety bond that is satisfactory to the public
employer, issued by a company authorized to do a surety business
in this state and in an amount that is not less than 10 percent
of the value of such assets.
  (h)(A) Banker's acceptances, if the banker's acceptances are:
  (i) Guaranteed by, and carried on the books of, a qualified
financial institution;
  (ii) Eligible for discount by the Federal Reserve System; and
  (iii) Issued by a qualified financial institution whose
short-term letter of credit rating is rated in the highest
category by one or more nationally recognized statistical rating
organizations.
  (B) For the purposes of this paragraph, 'qualified financial
institution' means:
  (i) A financial institution that is located and licensed to do
banking business in the State of Oregon; or
  (ii) A financial institution that is wholly owned by a
financial holding company or a bank holding company that owns a
financial institution that is located and licensed to do banking
business in the State of Oregon.
  (C) A custodial officer shall not permit more than 25 percent
of the moneys of a local government that are available for
investment, as determined on the settlement date, to be invested
in banker's acceptances of any qualified financial institution.
  (i)(A) Corporate indebtedness subject to a valid registration
statement on file with the Securities and Exchange Commission or
issued under the authority of section 3(a)(2) or 3(a)(3) of the
Securities Act of 1933, as amended. Corporate indebtedness
described in this paragraph does not include banker's
acceptances.  The corporate indebtedness must be issued by a
commercial, industrial or utility business enterprise, or by or
on behalf of a financial institution, including a holding company
owning a majority interest in a qualified financial institution.
  (B) Corporate indebtedness must be rated on the settlement date
P-1 or Aa or better by Moody's Investors Service or A-1 or AA or
better by Standard & Poor's Corporation or equivalent rating by
any nationally recognized statistical rating organization.
  (C) Notwithstanding subparagraph (B) of this paragraph, the
corporate indebtedness must be rated on the settlement date P-2
or A or better by Moody's Investors Service or A-2 or A or better
by Standard & Poor's Corporation or equivalent rating by any
nationally recognized statistical rating organization when the
corporate indebtedness is:
  (i) Issued by a business enterprise that has its headquarters
in Oregon, employs more than 50 percent of its permanent
workforce in Oregon or has more than 50 percent of its tangible
assets in Oregon; or
  (ii) Issued by a holding company owning not less than a
majority interest in a qualified financial institution, as
defined in paragraph (h) of this subsection, located and licensed
to do banking business in Oregon or by a holding company owning
not less than a majority interest in a business enterprise
described in sub-subparagraph (i) of this subparagraph.
  (D) A custodial officer may not permit more than 35 percent of
the moneys of a local government that are available for
investment, as determined on the settlement date, to be invested
in corporate indebtedness, and may not permit more than five
percent of the moneys of a local government that are available
for investment to be invested in corporate indebtedness of any
single corporate entity and its affiliates or subsidiaries.
  (j) Repurchase agreements whereby the custodial officer
purchases securities from a financial institution or securities
dealer subject to an agreement by the seller to repurchase the
securities. The repurchase agreement must be in writing and
executed in advance of the initial purchase of the securities
that are the subject of the repurchase agreement. Only securities
described in paragraph (a) of this subsection may be used in
conjunction with a repurchase agreement and such securities shall
have a maturity of not longer than three years. The price paid by
the custodial officer for such securities may not exceed amounts
or percentages prescribed by written policy of the Oregon
Investment Council or the Oregon Short Term Fund Board created by
ORS 294.885.
  (k) Shares of stock of any company, association or corporation,
including but not limited to shares of a mutual fund, but only if
the moneys being invested are funds set aside pursuant to a local
government deferred compensation plan and are held in trust for
the exclusive benefit of participants and their beneficiaries.
   { +  (L) The Oregon In-State Loan Fund. + }
  SECTION 7. ORS 293.701 is amended to read:
  293.701. As used in ORS 293.701 to 293.820, unless the context
requires otherwise:
  (1) 'Council' means the Oregon Investment Council.
  (2) 'Investment funds' means:
  (a) Public Employees Retirement Fund referred to in ORS
238.660;
  (b) Industrial Accident Fund referred to in ORS 656.632;
  (c) Consumer and Business Services Fund referred to in ORS
705.145;
  (d) Employment Department Special Administrative Fund referred
to in ORS 657.822;
  (e) Insurance Fund referred to in ORS 278.425;
  (f) Funds under the control and administration of the
Department of State Lands;
  (g) Oregon Student Assistance Fund referred to in ORS 348.570;
  (h) Moneys made available to the Commission for the Blind under
ORS 346.270 and 346.540 or rules adopted thereunder;
  (i) Forest Development Revenue Bond Fund referred to in ORS
530.147 and State Forestry General Obligation Bond Fund referred
to in ORS 530.280;
  (j) Oregon War Veterans' Fund referred to in ORS 407.495;
  (k) Oregon War Veterans' Bond Sinking Account referred to in
ORS 407.515;
  (L) World War II Veterans' Compensation Fund;
  (m) World War II Veterans' Bond Sinking Fund;
  (n) Funds in the hands of the State Treasurer that are not
required to meet current demands and that are invested in the
Oregon Short Term Fund established under ORS 293.728 { + , in the
Oregon In-State Loan Fund established under section 4 of this
2013 Act + } or in another commingled investment vehicle;

  (o) State funds that are not subject to the control and
administration of officers or bodies specifically designated by
law;
  (p) Funds derived from the sale of state bonds;
  (q) Social Security Revolving Account referred to in ORS
237.490;
  (r) Oregon University System Fund established by ORS 351.506
and the Higher Education Donation Fund established by ORS
351.130;
  (s) Local Government Employer Benefit Trust Fund referred to in
ORS 657.513;
  (t) Elderly and Disabled Special Transportation Fund
established by ORS 391.800;
  (u) Education Stability Fund established by ORS 348.696;
  (v) Deferred Compensation Fund established under ORS 243.411;
and
  (w) Trust for Cultural Development Account established under
ORS 359.405.
  (3) 'Investment officer' means the State Treasurer in the
capacity as investment officer for the council.
  SECTION 8. ORS 293.728 is amended to read:
  293.728. (1) The Oregon Short Term Fund is established in the
State Treasury as a commingled investment vehicle for investment
funds and the moneys described in subsection (2) of this section.
Interest earned by the Oregon Short Term Fund shall be credited
to the participating investor funds or accounts in the fund in
proportion to the amount invested.
  (2) Unless a federal law, court order, settlement or similar
agreement or business practice requires otherwise,  { + and
except as provided in section 4 of this 2013 Act, + } moneys
received by the State Treasurer that may not be discretely
invested as provided in ORS 293.723 shall be deposited in the
fund. Moneys that may be discretely invested as provided in ORS
293.723 may be deposited in the fund.
  (3) Moneys in the fund may be transferred as provided in ORS
293.205 to 293.225. The State Treasurer is the officer in charge
of the fund for purposes of ORS 293.220 and shall determine the
interest rate to be charged until the moneys are retransferred to
the fund. The interest rate may not be less than the rate
specified in ORS 293.220.
  SECTION 9.  { + (1) Sections 1 to 5 of this 2013 Act and the
amendments to ORS 293.701, 293.728 and 294.035 by sections 6 to 8
of this 2013 Act become operative January 1, 2014.
  (2) The Oregon Growth Board and the State Treasurer may take
any action prior to the operative date specified in subsection
(1) of this section that is necessary to allow the board or State
Treasurer to carry out sections 1 to 5 of this 2013 Act and the
amendments to ORS 293.701, 293.728 and 294.035 by sections 6 to 8
of this 2013 Act on and after the operative date specified in
subsection (1) of this section. + }
  SECTION 10.  { + This 2013 Act being necessary for the
immediate preservation of the public peace, health and safety, an
emergency is declared to exist, and this 2013 Act takes effect on
its passage. + }
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